Minimum wage rise doesn’t have any effect to unemployment: Reports

WAGE – Three

When restaurants pay restaurant workers enough so that even they can afford to eat in restaurants, that’s not bad for the restaurant business.- Nick Hanauer, a plutocrat

downloadThe political sector totally agrees in increasing the wage and equal pay as it is a popular step for vote bank too. In an election campaign President Barack Obama announced that “There is no denying the simple truth: America deserves a raise”10 Economists including Professor. Joseph Stiglitz defended increasing minimum wage rate and said that ‘‘CBO analysis underestimated the benefits and overestimated the costs” where he CBO report highlighted the potential job loss of 500,000”11.  IMF also urged the United States to raise its minimum wage, which it said is below international standards”12

 Ryan observed that ‘‘some employers may respond to the higher minimum wage by replacing workers with robots or foreign labour’’13 A law firm representing the Kentucky Restaurant Association cited legal and economic reasons to oppose the minimum wage increase.17 There are many examples around when wage is being increased; immediately the corporate sector opposes the idea by saying cost goes up, unemployment increase. Companies simply prefer job cut if they deal with wage rise.

 Studies have found 18 a link of ‘no effect’ of minimum wage rise with unemployment. Such as a recent paper 19 from University of California, have found no effect at all. John Schmitt presented the reasons for this conundrum in his new paper(pdf) 20. According to him employers can respond high wages as by 1) cutting benefits or hours or training  2) cutting wages for other, higher-paid workers 3) raising products prices 4) reducing profit margin 5) volunteering 6) becoming more efficient So on 21  John Schmitt’s conclusions are supported by more than 650 economists 22 including Joseph Stiglitz who signed a statement affirming that increasing the minimum wage would have little or no effect on employment but would improve workers’ well-being 23. So now it has been proved that minimum wage rise doesn’t have any effect to unemployment. So let it go up.

No one is against increasing the minimum wage rate but everyone has different excuse. Wage has been determined asymmetrically by employer.

‘‘ Wake up! Growing inequality is about to push our societies into conditions resembling pre-revolutionary France. Hear his argument about why a dramatic increase in minimum wage could grow the middle class, deliver economic prosperity … and prevent a revolution- Nick Hanauer, a plutocrat’’ TED Talk


This is not a question of increasing the minimum wage rate, but more importantly this is an issue of managing labour wealth in 21st century. To increase minimum wage rate and its uniformity should be a need of the globalisation. Several studies have found that rise of minimum wage rate does not necessarily increase unemployment. So if government is honest to maintain minimum wage rate at the subsistence level there wouldn’t be big problem.  Corporate, business and private societies don’t want put themselves at risk of high cost that might lead inefficient organization out from industry. So they would rather prefer to migrate in ‘cheap labour’ or replace robot in work place. It is government’s responsibility to coordinate between societies and provide support to them who are really in need. Uniformity in policy must also be introduced maintaining minimum wage rate as it should be a global problem.

Politicians, Economists and policy makers are desperately working to increase minimum wage rate but they seem unable to do so because they don’t have good excuse to convince corporate sector. Globalization has not been refurbished for equality yet; rather it has been made dysfunctional. Frustration cannot be prolonging. People can change to create new world with new prosperity and rationally equal share of resources.

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